Monday November 19, 2018

Washington News

Disabilities and Hurricanes Lead to Larger EITC

In IR-2018-10 and IR-2018-11, the IRS explained how hurricane victims and taxpayers with disabilities may qualify for a larger 2017 earned income tax credit (EITC).

Because Hurricanes Harvey, Irma and Maria caused massive damage to homes and buildings, many affected taxpayers had lower incomes in 2017. Taxpayers in the designated federal disaster areas are permitted to calculate the EITC using either their 2017 or 2016 income.

With the devastation of these hurricanes, taxpayers may have lower incomes in 2017 than in 2016. Because the EITC is based on earned income and other factors, the 2016 income may produce a higher EITC. Affected taxpayers should calculate the EITC for both years and are permitted to use the higher amount.

The IRS encourages taxpayers with disabilities to calculate their EITC. To qualify, a person who has a disability must have earned income and file a tax return. Even if the taxpayer is below the required filing income threshold, he or she should calculate the EITC and may decide to file.

The 2017 maximum EITC refund is $6,318. Even if taxpayers are not currently working, disability benefits from an employer qualify as earned income until reaching minimum retirement age. Social Security disability income benefits do not qualify as earned income.

Refunds for EITC or Added Child Tax Credit (ACTC) are delayed until mid-February to enable the IRS to review tax returns. The IRS expects the first EITC refunds to be issued after February 27, 2018.